Value Creation Has Shifted From….

byJay Deragonon02/12/2013

The Social Era is unfolding before our eyes and many are perplexed by the waves of change occurring throughout all markets. Old management models are not adequate enough to inculcate the changes required to succeed in the Social Era. The evidence suggests a shift in how organizations create value that markets want to consume.

The value creation process has shifted from an emphasis on tangible things to optimizing intangible things in order to create tangible results.

Let’s examine some of the evidence: Wealth Is Created from Intangibles

Social media, and all things social, represents intangible capital being created, added to, distributed and consumed. No need to list all the statistical evidence but when you consider 1/3 of the world’s population is using social media that alone represents a significant dynamic creating lots of change. It also represents over $1 trillion in commerce globally.

The increased recognition of intangible capital is reflected by the increase of the S&P 500 valuations assigning 80% of the company’s value to intangibles. Just 25 years ago intangible capital only represented 17%.

The World Bank reports that intangible capital represents up to 80% of the wealth in any country. We are witnessing the recognition of intangible value yet most companies still ignore it and subsequently miss tremendous opportunity to hardness the core of all value creation, intangibles.

If you want to succeed in the Social Era then the recipe is to create more value by using assets that create the most value, intangibles. The problem with most organizational leaders is they simply don’t know how because they can’t see it.

With mental models left over from the Industrial Era leadership positions are dominated by men and men relate to tangible things rather than intangible things. So to get a leaders attention you have to do two things:

Hold out the tangible carrot of results from learning to measure and improve intangible capital or,

Ask women to teach the men about the value of intangibles.

Either way when you focus on measuring and improving intangible capital you’ll experience a cultural multiplier effect. What is that? That is when your culture produces fives time the value of what you sell. Get it? No then follow those that do or get help from Smarter Companies.